Sampath Bank PLC’s (Sampath) Rs.12.1 billion rights issue, now fully subscribed, is a catalyst in boosting the Colombo Stock Exchange’s (CSE) rebound after getting beaten in the past three quarters, officials said.
Colombo’s main share index, the All Share gained as much as 1 per cent last week with the bourse gaining for the seventh consecutive session on Thursday led by gains in banking stocks such as Sampath. “After the Sampath rights issue and supported by the rupee appreciation along with the policy interest rate cut by the Central Bank and the caps on bank deposits helped to move the CSE up,” Dimantha Mathew, First Capital’s Head of Research for Investments Fixed Income and Equity told the Business Times.
Similar sentiments were echoed by Nanda Fernando, Managing Director Sampath Bank to the Business Times on the sidelines of a media round table discussion by the bank on Thursday. “The recent rally was started by Sampath’s share appreciation,” he said. The share price after allotting unsubscribed shares on June 28, appreciated 10 per cent to Rs. 150 within two weeks.
The issue to boost its core capital, just a year after it raised a similar amount in another rights issue was undersubscribed (only 61.5 million rights – 69 per cent were subscribed) by June 7 when it was officially closed and later Sampath Bank allotted the unsubscribed rights at its discretion.
The bank announced on July 28 that allotments amounting to 25.4 million shares were made to investors sourced by the Board which saw the entry of a new top 10 shareholder – Prabash Subasinghe, Chairman of Global Rubber Industries (Pvt) Ltd, Managing Director at Global Sea Foods (Pvt) Ltd and Chairman at Sri Lanka Association of Manufacturers and Exporters of Rubber Products, buying 5 per cent. This will likely bring in new additions to the Sampath board and Mr. Fernando added that it will be decided by the board in due course. “We managed a successful rights issue during this low growth pace in the country.”
Indra Silva, high-net-worth investor and Sampath Bank’s second largest shareholder (9.98 per cent stake or 28 million shares) after Dhammika Perera had not subscribed to his portion of rights. Sampath has 22 per cent in foreign shareholding.
Mr. Fernando noted that in the first quarter non performing loans increased by 4.8 per cent and most of it is concentrated around the construction sector. “NPL are the biggest challenge that banks face now,” he said. He added that the expected loan growth with the now increased capital will be at a maximum of 10 per cent.